Bitcoin (BTC), which was previously valued at $105,000, has fallen to as little as $98,750. This represents a drop of up to -6.8%. This rapid decline coincides with increased volatility in both the crypto and traditional market, as well as multiple other factors.
Why is Bitcoin down today?
DeepSeek’s Surprising Impact on Tech Markets
DeepSeek is a Chinese AI platform that has spooked US tech companies with its rapid rise and low cost. The Kobeissi letter, a renowned market commentary outlet posted Via X
“Nasdaq 100 futures are now down -330 POINTS since the market opened just hours ago as DeepSeek takes #1 on the App Store. This is how you know DeepSeek has become a major threat to US large cap tech. The stock market does not lie.”
DeepSeek, a new AI product that competes against ChatGPT but costs a fraction as much and uses less expensive hardware, is said to be able to do so. Benchmark testing indicates that DeepSeek performs better than ChatGPT for categories like AIME MATH-500 and GPQA.
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Kobeissi Letter:”OpenAI … was valued at ~$157 BILLION in October 2024 … has ~22 TIMES more employees than DeepSeek. This is why markets have been blindsided.”
Investors are worried that pulling capital from over-extended AI stock could lead to a tech crash. The correlation between the Bitcoin market and the crypto-market has significant consequences. “Crypto is front running as markets are closed & it’s a higher risk-beta asset class,”crypto analyst Miles Deutscher noted Via X.
He sees Bitcoin and cryptocurrency as having a bright side once the AI boom has subsided: “If DeepSeek is the knife that could (momentarily) burst the AI stock bubble, then this could actually be bullish for crypto, as liquidity rotates back. AI stocks sucked up a lot of speculative capital that previously would’ve flowed into BTC/crypto.”
#2 Pre-FOMC De-Risking
The commonly observed pre-election slump is another factor in the current decline.FOMC market de-risking. Historically, investors recalibrate their portfolios ahead of the Federal Open Market Committee meetings, scheduled for January 28–29, 2025. Even though the consensus is that rates will remain stable, investors often sell riskier assets such as Bitcoin or cryptocurrencies in advance of these announcements.
Deutscher commented:”Pre-FOMC de-risking (this is very normal, especially in an environment where we’re extremely sensitive to rates/U.S. dollar/liquidity).”
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Deutscher speculated if Federal Reserve chair Jerome Powell would adopt a more lenient stance in light of the recent changeover to the US presidency. “So… if stocks are already in panic mode, is Jerome Powell really going to come out super hawkish? Right as Trump has just entered office? Idk… My prediction is that the pre-FOMC sell-off marks the local bottom.”
3 Lack of new catalyst for price after Trump’s Executive Order
The market participants cite the perceived lack of new bullish information following the first ever crypto-related news last week. executive order Donald Trump. The initial order triggered crypto optimism but, in the absence of another catalyst for traders to use, they were left wanting. Deutscher refers to this as “the “lack of short-term ‘north star’ after Trump’s inauguration.”
#4 Long liquidations Exacerbating The Move
Coinglass dataThe downward trend in the price has been amplified by a wave of liquidations. In the last 24 hours, 313,683 traders have been liquidated. The total crypto liquidations reached $853.92 millions, including $795.5 in longs.
On HTX, the largest liquidation was for BTC/USDT worth $98.46 millions. 250 million dollars worth of positions on the Bitcoin market were liquidated. This surge is a result of the rise in liquidations BTC’s decline was amplified, prompting more traders unwind their positions. Analysts see these forced liquidations both as a cause of higher volatility and also a symptom.
BTC was trading at $98.983 as of press time.
Image created using DALL.E and chart by TadingView.com
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Source: www.newsbtc.com
